Property Market Update – April 2025

We would like to provide you with an update on recent property market developments that may interest you.

Property Market update as of April 2025

Introduction

The Australian housing market is at a turning point, balancing between growth and challenges. This summary, based on the Westpac Housing Pulse report for March 2025, breaks down what’s happening in simple terms, so you can understand how it might

affect you, whether you’re looking to buy, sell, or rent.

Current Market Snapshot

Right now, the market is “delicately poised,” meaning it’s a bit shaky after a busy end to 2024 and early 2025. Prices have slowed, and fewer people are buying or selling,

especially in Sydney and Melbourne. But there’s some good news: buyers are feeling a bit more positive than they did over the last two years, though they’re not expecting big price jumps soon.

Interest Rates and Their Impact

The Reserve Bank of Australia (RBA) cut interest rates by a small amount in February 2025, .25%, with more cuts expected. This could make borrowing cheaper, helping some people afford homes, but the market’s response is mixed. Past rate hikes didn’t slow things down as much due to population growth, so it’s not a quick fix.

Price and Activity Trends

Nationally, house prices dipped slightly over the last three months to February 2025 but bounced back a bit in February. Annual growth is now 3.2%, down from 10.9% last year, showing a slowdown. Sales are down 10% across the country, but in places like Sydney and Melbourne, auction results are starting to look better, which is a sign of hope.

Affordability and Supply Challenges

Buying a home is still tough for many. New houses and units are expensive compared to what people earn, especially in Sydney, where prices are 9.1 times the average income.

We’re also not building enough new homes, only 171,000 a year, when we need 240,000 to keep up, which keeps prices high and makes it hard for first home buyers.

Regional Differences

The market varies by city:

• Sydney (NSW): Prices are softening, and it’s starting to favor buyers, but it’s still pricey.
• Melbourne (Victoria): Prices have dropped for 11 months straight, with high unemployment making it tough for sellers.
• Brisbane (Queensland): Prices are up 9.8%, but it’s cooling, with cheaper homes in demand.
• Perth (Western Australia): Still strong, with 15.3% growth, but slowing down.
• Adelaide (South Australia): Prices grew 12.5%, but there are very few homes for sale.
• Hobart (Tasmania): Prices are stabilising, and rentals are tight.
• Darwin and Canberra: Mixed, with Darwin improving and Canberra staying flat.

Special Insights

A recent survey shows existing homeowners and investors are more likely to buy, but first home buyers are cautious due to costs. “Rentvesting” buying an investment property while renting your own home is becoming popular, especially in NSW and WA. New homes are often cheaper than older ones, except in Adelaide, and mortgage repayments are high, over 30% of income in most cities except Perth.

Looking Ahead

Prices are expected to rise by 3% in 2025 and 7% in 2026, with economic growth picking up and inflation easing. Unemployment might rise to 4.5% by 2025-2026, but lower rates should help borrowers. The market’s delicate balance means staying informed is key, especially if you’re thinking of buying or selling.

Comprehensive Analysis: Summary of the Westpac Housing Pulse Report for March 2025

This analysis provides a detailed summary of the Westpac Housing Pulse report for March 2025, based on the attached PDF “Westpac Housing Monthly 202502 (1).pdf,” finalised on 3 March 2025 and produced by Westpac Economics. It aims to present the key and relevant points in a manner accessible to any person over 18, ensuring clarity and simplicity, as of 03:08 PM PDT on Sunday, March 30, 2025.

Background and Context

The Westpac Housing Pulse report is a quarterly analysis of Australia’s housing market conditions and outlook, providing insights into price movements, turnover, affordability, supply, and regional variations. Given the current economic environment, with interest rate cuts and ongoing supply challenges, this report is crucial for potential home buyers, sellers, and renters to understand market dynamics. The report is based on data up to February 2025, offering a timely snapshot of market conditions.

Introduction and Market Overview

The report begins by describing Australia’s housing markets as “delicately poised,” indicating a fragile balance following an unsettled period at the end of 2024 and into early 2025. This period saw a slowdown in prices and a decline in market activity, particularly in Sydney and Melbourne, coming off a busy Christmas New Year period. Buyer sentiment has improved from deeply pessimistic levels over the last two years, but price expectations are less bullish, reflecting caution. The main challenges identified are affordability and supply, which continue to strain the market.

Interest Rate Impact

A significant factor is the Reserve Bank of Australia’s (RBA) monetary policy action, with a 25 basis point cut to the official cash rate in February 2025, and expectations of an additional 75 basis points of easing throughout the year, occurring quarterly. This is anticipated to reduce financing costs for borrowers, potentially improving housing affordability. Early signs suggest a positive response, with dwelling prices showing slight recovery in February, but historical sensitivity to interest rates is tempered by recent market dynamics. The report notes a prior disconnect from rate hikes due to surging population growth, which has supported demand despite higher rates, as per the section on “Interest Rate Sensitivity.”

Price and Turnover Trends

Nationally, dwelling prices dipped 0.2% over the three months to February 2025 but showed a slight recovery in February, with monthly data indicating a 0.1% increase.

Annual price growth has moderated to 3.2% across major capitals, down from 10.9% in February 2024, reflecting a cooling market. This moderation is driven by weaker demand, with turnover dropping 10% nationally over the three months to January, reflecting weak market activity. State level declines include sharp falls in NSW (-15%), Victoria (-17%), and Tasmania (-7%), as detailed in the “Turnover and Listings” section. However, forward indicators like auction clearance rates in Sydney and Melbourne are showing signs of improvement, suggesting potential stabilisation.

Affordability and Supply Issues

Affordability remains a significant challenge, with the report providing detailed data on price to income ratios and mortgage affordability. For new houses, the price to income ratio ranges from 4.2 times average household disposable income in Perth to 9.1 times in Sydney, indicating severe affordability issues in the latter. Since 2019, Sydney’s ratio has deteriorated by around 2.5 points, while Melbourne saw a smaller drop of 0.2 points, as per the “Affordability of New Dwellings” section. Mortgage repayments for new houses exceed the ‘rule of thumb’ threshold of 30% of income in all capitals except Perth (26.7%), where higher mining industry incomes provide relief.

Housing supply continues to lag behind demand, with projections indicating that completions will remain flat at 171,000 dwellings over 2025 and 2026, far below the target of 240,000 annually needed to meet government goals, as noted in “Housing Supply Projections.” This shortfall is driven by high construction costs, labor shortages, and planning delays, exacerbating affordability pressures.

Regional Variations

The report provides a detailed breakdown of regional market conditions, highlighting significant variations:

• NSW (Sydney): The market is rebalancing, with prices slipping slightly (-0.1% monthly) but showing a small positive gain in February, potentially facing a mild correction. Turnover declined 15%, and new listings are dropping, signalling a shift toward a buyers’ market, as per “State and Territory Market Conditions.”
• Victoria (Melbourne): Experiencing a prolonged, shallow correction with 11 consecutive months of price declines (-3.2% annually), particularly in the inner south. The market remains weak, with the highest unemployment rate nationally and elevated listings, making it harder for sellers, as detailed in the same section.
• Queensland (Brisbane): Stronger performance with prices up 9.8% annually, though growth is cooling from a 14.6% peak in earlier periods. Lower tier

properties are driving demand due to affordability pressures, and rental conditions are tight, with vacancies below 1%, as per “Rental Market Dynamics.”

• Western Australia (Perth): Still the strongest market, with annual price growth at 15.3%, though slowing from 20.4%. The market is cooling but remains robust, supported by tight rental conditions and strong investor activity, as noted in “State and Territory Market Conditions.”
• South Australia (Adelaide): Price growth eased to 12.5% annually but remains above the long term average. Supply is extremely tight, with a significant supply demand mismatch, and rental vacancies at 0.5%, as per “Turnover and Listings.”
• Tasmania (Hobart): Price declines are stabilsing, with growth improving to 1.4% annually from 0.4%. Regional areas show stronger recovery than the capital, and rental conditions are tighter, as per “State and Territory Market Conditions.”
• Northern Territory and ACT: Mixed performance, with Darwin showing improvement and Canberra remaining lacklustre with flat price growth, affecting affordability differently, as detailed in the report.

Special Topics and Additional Insights

The report includes several special topics that provide deeper insights:

• Home Ownership Survey 2025: Indicates a pull forward of buying plans, particularly among existing homeowners and investors, with 58% planning property related actions in the next five years and a third within 12 months. However, first home buyers are scarce, with only 2.2% planning to buy, likely due to affordability challenges, as per “Home Ownership Survey 2025.” “Rentvesting” (buying investment properties while renting your own home) is gaining popularity, especially in NSW and WA, showing how some are finding ways into the market despite high costs.
• Affordability of New Dwellings: New houses are generally more affordable than established ones in most capitals, with discounts ranging from 0.2% in Adelaide to 18.4% in Melbourne. However, in Adelaide, new houses carry a 3.4% premium, making them less affordable. New units command a price premium over established units, ranging from 8.6% in Melbourne to 23.1% in Brisbane, adding to affordability challenges for apartment buyers, as per “Affordability of New Dwellings.”
• Housing Supply Projections: Supply shortages persist, with new dwelling approvals showing tentative recovery (up 8.4% in 2024), but completions are expected to stay flat at 171,000 annually in 2025 and 2026, far below the target of 240,000 needed to meet demand, as per “Housing Supply Projections.” State specific supply shows Queensland, Western Australia, and South Australia leading in approvals, driven by population pressures and government initiatives.

Forecasts and Economic Outlook

The report provides forward looking projections:

• Price Forecasts: National dwelling prices are expected to rise by 3% in 2025 and 7% in 2026, with regional variations (e.g., Melbourne slightly outperforming), as per “Forecasts and Economic Outlook.”
• Economic Indicators: Economic growth forecasts predict a gradual increase in GDP, with unemployment rising slightly to 4.5% by 2025-2026, and inflation moderating, expected to return to the target band by mid 2025, as noted in “Economic Growth Forecasts.”
• Prudential Policy and Credit Conditions: Prudential policy remains in monitoring mode, with mortgage arrears and debt servicing ratios showing resilience despite high household debt levels. Lower interest rates and easing cost of living pressures are expected to alleviate borrower stress in 2025, as per “Prudential Policy and Credit Conditions.”

Table: Summary of Price Growth and Turnover by Capital City (February 2025)

City	Annual PriceGrowth (%)	3-Month PriceChange (%)	Turnover Change (3 Monthsto Jan, %)
Sydney	1.0	-0.1	-15
Melbourne	-3.2	-0.4	-17
Brisbane	9.8	0.3	-8
Perth	15.3	0.5	-5
Adelaide	12.5	0.4	-6
Hobart	1.4	0.0	-7
Darwin	Not specified	Not specified	Not specified

Advice Warnings & Disclaimers.

This information is intended to provide general information only and has been prepared without considering any particular person’s objectives, financial situation or needs. Any general advice contained within or given during this presentation (whether orally or in writing) does not consider your objectives, financial situation or needs. Nothing in this presentation is intended to be investment, financial advice or a recommendation to invest in a financial product. Before acting on such information, you should consider the appropriateness of the information having regard to your personal objectives, financial situation or needs. To the maximum extent permitted by law, we (Forward Path Advisory Pty Ltd), Joel Cleary & Rathakrishna Jeyabalasingam (Rads Je) disclaim all liability and responsibility for any direct or indirect loss or damage which may be suffered as a result of relying on anything in this podcast, including any forward-looking statements. Past performance is not an indication of future performance. In particular, you should obtain professional advice before acting on the information contained in this presentation.

Navigating Australia’s evolving property market requires informed financial decisions. At Forward Path Advisory, we can help you understand how these market trends affect your personal financial situation and investment strategy. Whether you’re considering buying, selling, or investing in this delicately balanced market, contact our team today for tailored advice that aligns with your long-term financial goals.